Cameron faces the heat on Tory loans

There is speculation that a Sunday newspaper will reveal the names of the businessmen who loaned money to the Tories during 2005.  Up until now the Conservatives have said that they will not break confidentiality undertakings that were made to their lenders.  Lenders to the Tory party apparently fear that, if their identities are revealed, they will be penalised by the Government in any bidding for contracts.

Today's Times reports suggestions that the Jersey-based Morain Investments is being used to hide a £2m loan that was made to the Conservative Party in the last week of Michael Howard's unsuccessful General Election campaign.  The £2m of extra borrowing was used to finance a last minute advertising offensive.

Itsnotracist_2Editor's note: "I'm not sure if the most offensive thing was the wastefulness and nature of the dog-whistle advertising campaign itself or how it was financed."

Labour are desperate to turn the media's fire on to the Tories after enduring a terrible ten days of negative publicity.  Cabinet minister Margaret Beckett wrote to David Cameron yesterday asking him to disclose all of the Tory lenders.

Pundits have not been impressed with David Cameron's handling of the political funding scandal.  "This has been David Cameron’s first major test as leader of the opposition, and his performance has at best been useless," was Peter Oborne's verdictAndrew Tyrie's proposal to cut the number of MPs in return for greater state funding of political parties was damned as "more taxation with less representation" by the Daily Mail.   

Tory proposals to 'clean up politics' are launched

David Cameron has now announced Conservative proposals to 'clean up politics'.  The proposals are the product of a three month study by Andrew Tyrie MP.  Full details can be found in a pdf on conservatives.com but the main recommendations are listed below (with Editor's comments):

  • An upper limit "on donations from individuals, trade unions, corporations and institutions" of £50,000.  "This," the party says, "will end parties' reliance on a small number of large donations and address concerns about donations buying honours or influencing policy".  It is a tighter restriction than the £100,000 suggested by ConservativeHome but a speedy vindication of our campaign.  It also offers great opportunities for the 'conservative movement'.  The big donors who have sunk all their treasure into CCHQ can soon invest it in The Taxpayers' Alliance, think tanks and, er, um, ConservativeHome!
  • Tax relief on donations of up to £3,000.  This is to be welcomed.  Giving to a political party is a public-spirited thing to do and should be honoured in the same way that charitable giving is encouraged.
  • "A ban on all forms of loans to parties, except from financial institutions on fully commercial terms, should be imposed."  Labour - rightly - seems poised to legislate for this immediately.
  • There would be additional state funding in the Tory proposals but this would be paid for by reductions in other costs of politics: "a reduction in the number of special advisers, the abolition of Regional Assemblies, and consideration to a reduction in the number of MPs."  This seems a reasonable deal for the taxpayer.
  • Additional state funding based on the number of votes a party received at the previous General Election.  The Tories propose a one-off £1.20 for each vote received at a General Election plus 60p per vote every year.  This is the least attractive recommendation.  The parliamentary allowance given to MPs already provides a significant advantage to incumbent politicians.  The advantage to incumbency will only be increased by a financial awards scheme that reflect the choices of yesteryear's voters.  "Additional state funding" should be proportionate to a political party's current ability to fundraise.
  • A reduction in permitted General Election expenditure from £20m to £15m.  This seems a reasonable proposal.  Much of current expenditure is wasted on billboard advertising (and not very good billboard advertising at that).  I know plenty of Tory candidates fighting LibDems who hated anti-Labour billboards appearing on their turf.  Coalition-building and narrowcast campaigning is the way of the future (but none of this is cheap).
  • A final proposal: "A statutory Honours Commission, accountable to both Houses of Parliament, to replace the House of Lords Appointments Commission and to assume from ministers the task of making recommendations to The Queen for all honours.”  Fair enough.

The Tory Party is clear that these recommendations intend to break the union-Labour link:

"[The proposals] offer Tony Blair and Gordon Brown the opportunity once and for all to end the Labour Party’s reliance on trade union funding – and with it the suspicion that the unions act as a brake on vital public service improvement plans."

For that reason it is difficult to see Labour accepting them.

Tories to propose cap on funding

Fundingcampaign_11_1Liam Fox has just confirmed on BBC1's Politics Show that the Conservative Party will propose a cap on individual donations.  The former Tory Chairman told Jon Sopel that the cap would be lower than the £100,000pa proposed by ConservativeHome.com (before the current scandals broke on 22nd February).  David Cameron is expected to announce comprehensive proposals tomorrow.  He will write to Ming Campbell and Tony Blair and urge a cross-party consensus.

Such a move would be confirmation that David Cameron is determined to 'stand up to big business'.  It could also force the Labour Party to cut its ties with 'big union' donors.  The lower the cap the greater will be the incentives for the political parties to create a diverse funding base made up of mass connections.

The emphasis must be on 'mass connections' rather than 'mass membership'.  The days of mass membership political parties are over.  The Conservative Party should lead the way in raising money for single-issue campaigns and individual candidates.  David Cameron could, for example, turn his campaign on climate change into a fundraising effort.  Other campaigns could be run on matters of concern to small businesses, churchgoers and sports enthusiasts. 

Liam Fox hinted that some compensation from the taxpayer might be necessary if a cap is introduced.  If such "compensation" is introduced it must be proportionate to a party's success in raising funds from small donors.  State funding should not be decided by insiders in the interests of incumbent politicians.

1.25 UPDATE: Iain Dale is unimpressed with the idea of a cap on donations:

"Tomorrow the Conservatives will outline plans to 'clean up' the system. One proposal will be to limit donations to a figure probably under £100,000. I look forward to hearing where they think they money will come from to make up the shortfall... I suppose symbolically it would be quite appealing for David Cameron to stand up and say "I am announcing today that the Conservative Party will no longer accept any donation of more than £100,000." He would be cheered by the electorate and it would reinforce his 'change' agenda... But on the other hand, think of the message this sends to those donors who have kept the Party afloat in the past through their generosity. If Michael Ashcroft had not been around during the Hague years the Party would have gone under. It's as simple as that."

Guido's take on this news notes the possible gains to the conservative movement of a cap:

"The effect of this will be that non-party organisations will get funding (as with political action committees in the U.S.). Effectively political funding will be diversified and less controlled centrally by the parties, this can only be a good thing. The situation where the Labour party is funded and controlled from within No. 10 is just unhealthy."

Tory deficit of £12m is covered by loans

Fundingcampaign_11A number of ConservativeHome visitors noted the absence of Tory MPs on the TV last week as Labour became engulfed in its loans-for-peerages scandal.  We all suspected that our party was hiding something and today's Times suggests that it was...

Last night on David Cameron's 101st day Michael Howard announced his decision to stand down at the next General Election.  Over the previous 100 days David Cameron has distanced himself from Michael Howard on immigration, tuition fees, tax and public service choice.  If today's Times is correct Mr Cameron needs to act quickly to distance himself from Mr Howard's fundraising record.  Andrew Pierce (who nearly always authors The Times' Tory funding stories), David Charter and Philip Webster write:

"The Tory party averted one of the most serious financial plights in its history by securing secret loans of at least £20 million from rich benefactors, The Times can disclose.  It dwarfs the £14 million in loans negotiated for the Labour Party by Lord Levy, Tony Blair’s fundraiser, and finally admitted by the party yesterday. The revelation of the Tory figure will cause embarrassment for David Cameron."

The way for Mr Cameron to get ahead of this issue is to clean the stables at CCHQ and outflank Labour.  Reports in The Telegraph suggest that he is about to:

"In an interview in The Daily Telegraph today, the Conservative leader says he is "unhappy" with the present system.  He wants election spending limits cut by 25 per cent, from £20 million to £15 million. This would significantly relieve the pressure on fund-raisers who have become increasingly reliant on wealthy individuals."

The Tory leader also expressed support for moving away from loans that do not have to be declared but he declined to commit the party to act unilaterally.  The party should act unilaterally for reasons of moral leadership and for its own good.  Donors are deliberately choosing to lend to the party - rather than to give - because they know that this maximises their leverage on the party.  This is leaving the party precariously balanced on the top of a mountain of debt.  David Cameron promises to stand up to big business but a few big donors hold the party's finances in the palm of their hands.

The Conservative Party will - it appears - come forward with more proposals on Monday.

Editor: "I hope Monday's proposals do not include a cut in total permissible election spending.  This might only increase the relative power of individual big donors.  There should instead be a limit of approximately £100,000pa on the amount that any one person can give.  Donors wanting to give more should invest in other forms of conservative infrastructure as they have done - to great effect - in America.  Political parties should be able to raise as much money as they can from diverse funding sources.  Only a maximum limit on individual annual donations will force Britain's political parties to invest in the kind of internet funding outreach that will produce a whole new kind of politics.  As the parties have to raise funds on the internet - and through other grassroots sources - they will have to reconnect with the concerns of ordinary voters.

My own guess is that state funding will come.  Conservatives should insist that such funding should only be released as a fixed proportion of the money that parties raise from private donors.  This will ensure that taxpayers' money goes to the parties that have most public confidence.  The worst thing would be for public funding to be decided by insiders and incumbents who would use state funding to protect their positions."

Labour's Enron moment

Fundingcampaign_1 Some news stories are genuinely startling.  This morning's revelation that Jack Dromey, the Labour Party's own treasurer, did not know that his party had borrowed millions of pounds is one such story.  The fact that Mr Dromey has made his anger public is confirmation of the growing rebellion within the Labour movement against Blair and his style of leadership.

Nigel Evans MP, who following his pursuit of Tessa Jowell appears to have emerged as the leading Tory sleazebuster, provided the BBC with a prize quote:

"Even Enron would be amazed at hearing the sort of accounting practices that are going on within the Labour Party.  I have never known anything like it. It is quite staggering."

The Tory silence on this issue is not staggering but it is frustrating.  Backbenchers Nigel Evans and Quentin Davies should not have to carry all the political water on this issue.  The nature of party funding and the trading of peerages for cash stinks to high heaven.  The Conservative Party should take a stand on this issue.  It should say that hidden loans are unacceptable and that no party should receive more than £100,000 from any individual in any one year.  Both of those two measures would put flesh on David Cameron's pledge to stand up to big business.  It would also force all of Britain's political parties to democratise their funding base.  This doesn't have to happen tomorrow.  It could happen after a two to four year period in which the political parties could - with the help of the internet - develop a wider funding base.  See this post for more background on ConservativeHome's political funding campaign.

"Sleaze is an oil slick"

Sleaze is making the headlines again (if not the News at 10!). Tony Blair recommended Dr Chai Patel for a peerage after he had made a £1.5 million loan to the Labour party last year. There is a loophole that loans to political parties don't have to be made public.

Peter Preston comments about this sleaze in today's Guardian:Peter_preston_2

"Sleaze is an oil slick on the beach of politics. It sticks, stinks - and kills reputations. It stayed with John Profumo through 43 desolate years as he toiled for redemption. It still swills around the Conservative party that David Cameron strives to revive. And now it is a threat this government can't ignore any longer: a foul Blair "legacy" that may finish off Brown as well.

Too apocalyptic? Why should a few soft loans to Labour matter? Who cares if rich men, waving chequebooks, can collect their peerages in that dark alley round the back? We've wallowed in so much gunk since 1997 - dodgy millionaires, dodgy mortgages, dodgy dossiers - that ermine for sale should barely rise eyebrows. But it does."

We recently asked what had been Labour's sleaziest moment, and there was no shortage of suggestions. But what can be done about party funding? Preston continues:

"The funding of political parties is a grey hole for democracy everywhere from Washington to Paris. Desperate bank managers beget desperate fundraisers. And probably neither the Committee on Standards, nor its next organisation for examination, the Electoral Commission, has easy answers."

ToryDiary recently advocated a cap of £100,000 - but people shouldn't be able to get around the cap by making loans that then saddle political parties with unstable levels of debt and/or hold their policies hostage.

Deputy Editor

Another day, another Labour sleaze story or two

Rover_1Labour's decision to lend Rover Cars money in the run-up to last year's General Election has been criticised by the National Audit Office.  The NAO believes that the chances of £5.2m of taxpayers' money being repaid are "remote".

Tony Blair has defended the emergency funding of Rover:

"We were doing everything we can, and should have done everything we can, to preserve as many jobs at Rover as possible... No-one would have forgiven us if we hadn't gone every inch of the way to try and save the jobs.  If we had refused to do that at the time, people would have been complaining bitterly."

Shadow Trade & Industry Secretary Alan Duncan is furious.  Interviewed on this morning's Today programme he said that Labour only made the loan to keep the issue from spoiling Labour's polling day chances.  He suggested that Labour would not have made the highly contentious loan if it had not been an election time.  MG Rover Cars operated in the electoral battleground of the West Midlands.  Mr Duncan said that Labour had used the money for political purposes and should now repay it.  The Rover loan is one of the more exotic ways in which Labour has allegedly bought client voters with its supplicant state strategy.

Also on Today, John Humphreys quizzed Lord Falconer about the fact that every person who has donated £1m to Labour has ended up in the Lords.  Lord Falconer was unable to defend the situation - only suggesting that the Tories behaved similarly.  ConservativeHome believes that a cap of something like £100,000 should be imposed on annual donations to a political party from individuals and trade unions.  It would put an end to such cash-for-peerage allegations and force the political parties to seek broad support from the whole population.

It's time for Cameron to stand up to big donors

Conservativehomeeditorial_10Stuart Wheeler, the multi-millionaire spread-betting tycoon, is in the news again.  Mr Wheeler has been consistently prominent in Tory affairs over recent years...

  • He gave William Hague's Tories £5m before the 2001 General Election, partly because he liked the Keep The Pound campaign;
  • His Today programme intervention in October 2003 - 'IDS has to go' - helped precipitate the fall of the last but one Conservative leader;
  • 5mdonor_1And, today, he's criticising David Cameron's education and environment policies.  Is Mr Wheeler the donor who has 'recalled' a £250,000 gift to the Conservative Party?

All this makes me very uncomfortable.  I admire Mr Wheeler's Euroscepticism and agree with his reservations about current Tory policies on academic selection and Kyoto but I do worry about his influence.  In last year's leadership election campaign the views of big party donors were constantly sought by the media.

Ashcroft_michael_8Not so long ago Lord Ashcroft argued that political parties should be able to "accept financial support — cash, benefits in kind and credit — from whomsoever they choose and without financial limit".  His only significant condition was openness.  Lord Ashcroft is a generous man who helped save the Conservative Party from financial disaster when he was William Hague's treasurer - the party should be grateful to him - but this is poor advice.

Big money has spoilt American politics.  Individuals like Mike Bloomberg, Mayor of New York, and Jon Corzine, Governor of New Jersey, invested their substantial personal fortunes in buying office for themselves.   Members of America's House of Representatives start fundraising for their campaigns as soon as they are re-elected.  The Abramoff affair is now rocking the Republican Party establishment.

At the moment there is nothing to stop a UK citizen or other permissible donor making unlimited donations to political parties.  Imagine if the late James Goldsmith hadn't just funded the Referendum Party for the 1997 General Election but had set up a £200m endowment that would have allowed it to campaign in perpetuity?  That would have been perfectly legal under existing rules.

David Cameron has said that he wants to stand up to big business.  This site - not uncritical of him - has welcomed that commitment.  Conservatives should be the friends of free and competitive markets.  That doesn't mean befriending big businesses who can, Adam Smith warned us, conspire against smaller firms and the wider public interest.

I don't suggest that the Conservatives should immediately declare that they will not accept any big donations - that would be the equivalent of unilateral financial disarmament in a world where Labour would still be receiving millions from the likes of Lord Drayson, Bernie Ecclestone and Lord Sainsbury.  I do think, however, that Conservatives should support a more diverse basis for party funding.  I'm not sure what the maximum donation should be but £100,000 would seem enough.  What do you think?

In place of relying on big money from big business Britain's political parties would have to seek money from private citizens.  That would be more democratic.  The internet provides political parties with enormous new opportunities to raise new monies.  At the same that a cap was introduced on big money donations I would favour tax relief on small donations of, say, up to £100.  Giving to political parties is a comnmunity-minded thing and it is better for public money to match the preferences of lots of individuals than being allocated by politicians in private dialogue with one another in Westminster.